Citigroup Closed-End Funds Issue Statement
03 June 2005 - 6:01AM
Business Wire
The following Citigroup closed-end funds - Salomon Brothers Capital
and Income Fund Inc., Salomon Brothers Emerging Markets Debt Fund
Inc., Salomon Brothers Emerging Markets Floating Rate Fund Inc.,
Salomon Brothers Emerging Markets Income Fund Inc., Salomon
Brothers Emerging Markets Income Fund II Inc., Salomon Brothers
Global High Income Fund Inc., Salomon Brothers Global Partners
Income Fund Inc., Salomon Brothers Inflation Management Fund Inc.,
Salomon Brothers Municipal Partners Fund Inc., Salomon Brothers
Municipal Partners Fund II Inc., The Salomon Brothers Fund Inc,
Salomon Brothers High Income Fund Inc, Salomon Brothers High Income
Fund II Inc, Salomon Brothers Variable Rate Strategic Fund Inc.,
Salomon Brothers 2008 Worldwide Dollar Government Term Trust Inc.
and Salomon Brothers Worldwide Income Fund Inc. - today issued the
following statement: On May 31, 2005, the U.S. Securities and
Exchange Commission ("SEC") issued an order in connection with the
settlement of an administrative proceeding against Smith Barney
Fund Management LLC ("SBFM") and Citigroup Global Markets Inc.
("CGMI") (each an affiliate of the manager) relating to the
appointment of an affiliated transfer agent for the Smith Barney
family of mutual funds (the "Affected Funds"). The SEC order finds
that SBFM and CGMI willfully violated Section 206(1) of the
Investment Advisers Act of 1940 ("Advisers Act"). Specifically, the
order finds that SBFM and CGMI knowingly or recklessly failed to
disclose to the boards of the Affected Funds in 1999 when proposing
a new transfer agent arrangement with an affiliated transfer agent
that: First Data Investors Services Group ("First Data"), the
Affected Funds' then-existing transfer agent, had offered to
continue as transfer agent and do the same work for substantially
less money than before; and that Citigroup Asset Management
("CAM"), the Citigroup business unit that includes the Fund's
investment manager and other investment advisory companies, had
entered into a side letter with First Data under which CAM agreed
to recommend the appointment of First Data as sub-transfer agent to
the affiliated transfer agent in exchange, among other things, for
a guarantee by First Data of specified amounts of asset management
and investment banking fees to CAM and CGMI. The order also finds
that SBFM and CGMI willfully violated Section 206(2) of the
Advisers Act by virtue of the omissions discussed above and other
misrepresentations and omissions in the materials provided to the
Affected Funds' boards, including the failure to make clear that
the affiliated transfer agent would earn a high profit for
performing limited functions while First Data continued to perform
almost all of the transfer agent functions, and the suggestion that
the proposed arrangement was in the Affected Funds' best interests
and that no viable alternatives existed. SBFM and CGMI do not admit
or deny any wrongdoing or liability. The settlement does not
establish wrongdoing or liability for purposes of any other
proceeding. The SEC censured SBFM and CGMI and ordered them to
cease and desist from violations of Sections 206(1) and 206(2) of
the Advisers Act. The order requires Citigroup to pay $208.1
million, including $109 million in disgorgement of profits, $19.1
million in interest, and a civil money penalty of $80 million.
Approximately $24.4 million has already been paid to the Affected
Funds, primarily through fee waivers. The remaining $183.7 million,
including the penalty, will be paid to the U.S. Treasury and then
distributed pursuant to a plan to be prepared by Citigroup and
submitted within 90 days of the entry of the order for approval by
the SEC. The order also requires that transfer agency fees received
from the Affected Funds since December 1, 2004 less certain
expenses be placed in escrow and provides that a portion of such
fees may be subsequently distributed in accordance with the terms
of the order. The order requires SBFM to recommend a new transfer
agent contract to the Affected Fund boards within 180 days of the
entry of the order; if a Citigroup affiliate submits a proposal to
serve as transfer agent or sub-transfer agent, an independent
monitor must be engaged at the expense of SBFM and CGMI to oversee
a competitive bidding process. Under the order, Citigroup must
comply with an amended version of a vendor policy that Citigroup
instituted in August 2004. That policy, as amended, among other
things, requires that when requested by a Fund board, CAM will
retain at its own expense an independent consulting expert to
advise and assist the board on the selection of certain service
providers affiliated with Citigroup. At this time, there is no
certainty as to how the proceeds of the settlement will be
distributed, to whom such distributions will be made, the
methodology by which such distribution will be allocated, and when
such distribution will be made. Although there can be no assurance,
Citigroup does not believe that this matter will have a material
adverse effect on the Funds. The Funds did not implement the
transfer agent arrangement described above and therefore will not
receive any portion of the distributions. Symbols: EDF, EFL, EHI,
EMD, ESD, GFY, HIF, HIX, GDF, IMF, MNP, MPT, SBF, SBG, SBW, SCD
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